CERTIFICATE COURSE ON NEGOTIABLE INSTRUMENTS

ACT 1881

What Happens on Dishonor of a Cheque?

The procedure that takes place on dishonor of a Cheque is that of a summary trial as governed by
the Criminal Procedure Code 1973. This has been done so as to ensure speedy disposal of the
cases under Section 138 of the Negotiable Instruments Act. The procedure has been very well
elaborated upon by the Delhi High Court in the landmark ruling of :-

Rajesh Agarwal v. State1

1
(2010) ILR 6 Del 610

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 1. On the day, the complaint is presented, if the complaint is accompanied by affidavit of
complainant, the concerned Metropolitan Magistrate would scrutinize the complaint and
the documents and if the commission of an offence is made out he would take cognizance
and direct the issuance of summons against the accused, against whom case is made out.
2. If the accused appears, the Metropolitan Magistrate shall ask him to furnish bail bond to
ensure his appearance during trial and ask him to take notice under Section 251 Cr. P.C.
and enter his plea of defense and fix the case for defense evidence, unless an application
is made by an accused under section 145(2) of NI Act for recalling a witness for cross
examination on plea of defense.
3. If there is an application under Section 145(2) of NI Act for recalling a witness of
complainant, the court shall decide the same, otherwise, it shall proceed to take defense
evidence on record and allow cross examination of defense witnesses by complainant.
4. The Court would then hear the arguments of both sides.
5. The Court finally passes order/judgment.

THE REALITY

 The legislature and the Judiciary has tried its level best to ensure that the matters under
Section 138 are disposed of as quickly as possible.
 However, the true picture in the Indian Courts it that, it takes a minimum of 6 months and
a maximum of an year or 18 months to dispose of a pending case under the instant
provision. This is a reality in most of the Indian District Courts.
 Further, in almost most of the cases the accused does not have any defense from himself.
This is very well provided under the provisions Section 139 and 140 as well. Thus, the
accused consistently makes an attempt to go for delay tactics and tries to evade the
process of law.
 Most of the cases under the instant provision are decided by way of an out of court
settlement or mediation at times.

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THE PROCESS

1. If a cheque, by the reason of being bounced, is returned back, A legal notice under
Section 138 of the Negotiable Instruments Act, 1881 has to be sent to the payee. This
notice has to be sent within 30 days of the receipt of the intimation of Dishonor of such
cheque.
2. A time limit of 15 days is then given via the legal notice, to pay the amount of the
dishonored cheque, failing which; a criminal complaint is filed for such dishonor, within
30 days of the expiry of such notice.
3. A criminal complaint is filed before the court of competent jurisdiction, within 30 days of
the expiration of the notice period as per Section 142 of the Negotiable Instruments Act
1881.
4. The case has then to be marked to the Magistrate of Appropriate Area Jurisdiction. (S.
143 of the NI Act)
5. The defaulting person (Accused) is then produced before the court.
6. Now the Court can adopt for any of the following two courses of action-
 Hear the case on Maintainability basis on the same date and scrutinize the time line,
limitations, etc.
 Take preliminary evidence of witnesses present in support of the complainant by an
affidavit of the complainant in support of the complainant, and give a future date for
hearing and such scrutiny as required.
7. Post summoning of the accused, summons are issued to he accused under Section 144 of
the Act.

Henceforth there lie two probabilities-

(1). The Accused is not served and is made to undergo coercive measures by the police.

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(2). The accused is served and his appearance is ordered in the court.

8. Now if the accused does not appear in the court, bailable or non- bailable warrants can be
issued to compel him for such appearance. After this coercive appearance, the court
decides whether to grant him the bail (on furnishing the required bonds), or send him for
imprisonment.
9. However if the accused simply obeys the summons and presents him in the court, the
court generally grants him bail on furnishing of required bonds and surety.
10. After completion of all these and such other formalities, the required documents are
supplied and the trial starts.
11. Notice is given to the accused and the trial commences.
 Now if the accused pleads guilty, he is simply convicted for the offence.
 However if he pleads not guilty, a date is given for the completion of evidence by the
complainant.
12. After the completion and examination of the evidences and witnesses by the complainant,
the evidences and witnesses produced by the accused are examined.
13. There then lie the respective arguments by both the sides, i.e. The Accused and the
Complainant.
14. Upon submission of the oral arguments and thorough scrutiny of the witnesses and the
evidences, the court finally pronounces the judgment.

With this we come to an end to our Course. Hope it was an enriching experience for all of
you. We thoroughly enjoyed the journey with you all and hope you all did the same too. We
shall roll out the assignments within a couple of days so that you all get ample time to
complete them.

Thank you.

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